OREANDA-NEWS. June 15, 2010. In conformity with the plan of economic reforms through the end of the year announced by the President of Ukraine, NERC intends to scrap benefits for coal, mining and chemical producers, and will raise electricity cost for private consumers. The Commission plans to bring electricity cost up to the economically reasonable level. The plan also envisages liquidation of the Coal of Ukraine State monopoly by the end of 2012, allowing the GenCos to buy coal from private mines. Starting from 2012, GenCos might abandon the Energorynok services and sign direct contracts with consumers. Special attention is paid to a reform of the oil and gas sector. First of all, it means downsizing NJSC Naftogaz of Ukraine and spinning off Ukrtransgas into a separate enterprise.

Millennium Capital: the above transformations will only benefit the energy sector. Deregulation in the sector will finally bring power-generating companies in the area of positive profitability, as well as give them an opportunity to invest in reconstruction and modernization of its equipment (assuming that the wear of equipment of power plants is more than 60%). In accordance with Presidential plans, the process of liberalization of the electricity market should be completed by 2015. Unfortunately, to realize these plans it is necessary to agree the repayment of Energorynok’s debt of UAH 19bn to the GenCos. Also it is quite a difficult undertaking to perform the downsizing of Naftogaz, because in case the Ukrtransgaz spin-off, Naftogaz will lose the lion’s share of its income. Additional revenues for Naftogas, the government claims, will be brought by raising consumer prices for gas to the economically sound level. However, this increase will not begin until 2013.